Earnings season for the third quarter kicks off this week, and with it, many investors eagerly await to hear about the performance of their favorite companies. Unfortunately, not many analysts are looking to the financial sector for blockbuster earnings reports.
U.S. banks have consistently been reporting disappointing earnings quarter after quarter, and many investors have had enough, selling their stakes en masse. Shares of Bank of America are down over 50% YTD, and shares of Citigroup are down over 40%.
According to the New York Times, analysts expect bank revenues from the third quarter to fall 4% (back to 2005 levels), and earnings are expected to be where they were in late 2002.
The reasons cited for this poor performance are the third quarter's volatility in market trading, new federal regulations putting pressure on growth, and government-mandated cuts in debit-card swipe fees that were once very lucrative.
Reasons aside, it seems that many have simply had it with bank management. With the impending threat of balance-sheet contagion from a potential Greek default, U.S. banks say they are hardly exposed, yet many investors are not quick to trust their numbers. And another bad earnings season will just put salt in the wound.
Of course, with all the doom and gloom surrounding bank earnings, short-sellers are paying close attention. Below, we've listed 10 banking stocks that have seen a sharp increase in shares shorted over the last month (i.e., increased bets that these investments will fall in value).
Short-sellers seem to think these banks stocks are vulnerable ahead of earnings season -- do you?
Use this list as a starting point for your own analysis. (Click here to access free, interactive tools to analyze.)
List compiled by Eben Esterhuizen:
1. City Holding
2. United Bankshares
3. United Community Banks
4. Park National
5. 1st Source
6. Oritani Financial
7. Community Trust Bancorp
9. Brookline Bancorp
10. People's United Financial
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen and Alexander Crawford do not own any of the shares mentioned above. Short data sourced from Yahoo! Finance, all other data sourced from Finviz.